People downsizing, homes listed as rentals impacting apartments
NORTH BAY - Rising unemployment together with a struggling economy and a large number of foreclosed homes are driving down rents for apartments and income homes.
Pressure on rents is coming from renters who are looking to save money after losing a business or job, according to property investment brokers and managers.
In a six-apartment Sausalito complex, Katherine Higgins, a broker and owner of the property, had couples replacing singles in two of three units vacated in a three-month period recently.
"Couples that were making good money and living in luxury rentals are now downsizing to one-bedroom apartments to save on rent and ride out the job insecurity," said Ms. Higgins of Bradley Real Estate in San Rafael.
Ms. Higgins had to lower the rent to fill the apartments.
Kirsten Strain, an investment property agent with NAI BT Commercial in Santa Rosa, said rental-market pressure has come from not only renters moving to lesser-expensive housing, but also from the so-called "shadow rental" market, which are single-family homes for rent.
"There are four roommates in a two-bedroom unit versus two roommates each having their own room, more tenants are moving back to the family home and more single-family residences are being offered up as rentals," she said.
This shadow rental market has been estimated to capture half of rental demand traditionally, and that share has been growing in recent years, according to a report on slumping apartment demand by CBRE Torto Wheaton Research. Instead of demand for rentals nationally dropping as it did with the 2001 economic recession, total rental demand grew by 2.1 percent, or 700,000 households.
Senior CBRE economist Gleb Nechayev noted four major reasons for a decline in apartment demand but an increase in overall rental demand. Three of them have to do with families with children looking for larger rentals, having trouble meeting credit requirements for larger complexes after a foreclosure or bankruptcy and preferring to live in the children's school district.
Shadow rentals are having a strong impact on high-end apartments, according to Suzette Beck, whose department at Eugene Burger Management Corp. specializes in single-family or few-unit income properties and currently manages 420, mostly in Sonoma County.
"For a while owners of nicer apartments were charging a lot for units with newer construction, amenities and location," she said, pointing to the relatively high-value Fountaingrove area of northeast Santa Rosa as a key example. "There were properties where we saw a $400 to $500 a month reduction in rent, and now you can have a single-family home for $50 to $100 a month more than an apartment."
High-rent apartments in Marin County are under pressure as well. Southern Marin County units being marketed for more than $2,000 a month are leasing slowly, according to Ms. Higgins of Bradley Real Estate. In central Marin multifamily property owners are giving up rent increases gained from 2002 through last year.
"Rents will most likely decline by about 10 percent as renters become owners again or relocate to another city or state in pursuit of employment," Ms. Higgins said.